HS Today – PERSPECTIVE: Maritime Blockade and Sanctions Intensify Strain on Iran’s Economy
As the US Navy continues a maritime blockade off the Strait of Hormuzi, the world hopes for a permanent ceasefire and an end to the US / Israel war against Iran. As these efforts renew, the pressure of longstanding economic sanctions acts as the invisible hand working to collapse the unregulated self -interest of the current regime’s access to hard currency needed to achieve its aims of funding nuclear weapons, terrorist proxies and disrupting economic prosperity in the Middle East. While these sanctions are non-kinetic and hold a less visceral appeal than military strikes, they continue to grind down Iran’s cash reserves. Merged with the hard power of a naval blockade, their overall effectiveness could further implode the Iranian economy and push its hardline regime back to the negotiation table. The scope of this article is limited to the US-Iran – China interplay and how using international financial frameworks, combined with US economic sanctions and a maritime blockade, can affect Iran’s remaining cash surplus from oil exports to China, thereby reducing the regime’s economic viability.
First Principles – Economic Indicators
From a historical perspective, the US remains the world’s largest, strongest and most stable economy and continues to greatly influence the international financial system, which Iran must operate within to keep its oil exports and revenues viable. Various social media platforms and pundits continue to argue Iran has gained the economic advantage by creating a geographic chokehold on the Strait of Hormuz thereby enabling them to outlast US efforts. Such efforts have indeed acted to disrupt the energy transmission belt of the strait, and increased Iran’s ability to temporarily export global economic shocks; however, the US can use the dollar based financial system to act as a foreclosure tool on Iran’s sanctions-based economy. While the outcome remains uncertain, basic economic indicators from the World Bankii demonstrate how overmatched Iran’s economy is compared to the US. For example, using Gross Domestic Product (GDP),iii an indicator defined as the total income earned through the production of goods and services within a country’s borders (economic territory).
Additionally, and prior to the war, as Iranians bravely protested their poor economic conditions and repressive governmental policies, the Iranian currency valuation swiftly bottomed out to zero (Iranian Rial, IRR)v in exchange for US dollars; and at the time of this writing, it remains at zero. Conversely, the US dollar remains the world’s preferred global reserve currency.
Iran’s key economic indicators related to natural resources, oil production and shipping will continue to remain in the spotlight; and are of great interest to consumers, energy traders, buyers and sellers. However, the regime’s hard-liner response to US negotiation efforts does not place it in total control of the global energy market, nor does it place Iran in a position of long-term superiority. The GDP comparisons highlight a critical reality: while Iran’s regime can temporarily disrupt the global economy through control of geography, the United States and its economy are better positioned to withstand and absorb the shocks.
Components of the International Financial Framework
Cross boarder Finance – Everywhere you Go
Having access to the dollar to buy, sell and trade oil within the global energy market is required, to effectively do business and commerce within the international banking system. In today’s global economy a key element of the international financial framework is the cross-border finance system. This system transmits payments between banks and enables money to flow back and forth between foreign investments, commodity trading and goods transferred by the global supply chain. At the center of this infrastructure is the US dollar.vi As discussed earlier, the US dollar has become the world’s default currency and medium of exchange.
Underscoring the importance of access to the US dollar and its use as a foreclosure tool; Secretary of the Treasury Scott Bessent, in his recent testimony before Congress, and response to Senator Katie Britt in US progress and its ‘maximum pressure campaign’ toward Iran stated:
“Well, what we can do at Treasury and what we have done is created a dollar shortage in the country … It came to a swift, and I would say grand, culmination in December when one of the largest banks in Iran went under … The Iranian currency went into freefall. Inflation exploded, and hence we have seen the Iranian people out on the street. We will continue monitoring … all the Iranian partners … We have seen the Iranian leadership wiring money out of the country like crazy. So, the rats are leaving the ship, and that is a good sign that they know the end may be near.” vii
Furthermore, highlighting the value of the US dollar as the preferred medium of exchange for both the American financial system and foreign investments, are the New York stock exchange and the NASDAQ, both based in the US, and with market capitalizations much larger than any other foreign country’s exchange. Edward Fishman, in his book “Chokepoints,” writes that “valued at over $50 trillion, the US bond market dwarfs those compared to the rest of the world. When firms anywhere turn to international capital markets for cash, they almost always borrow dollars; 70% of the world’s debt is denominated in dollars.”viii Both debits and credits are usually cleared through the US-based payments systems known as “the Clearing House Interbank Payment System (CHIPs) or the Federal Reserve’s Fedwire system.”ix Additionally, Iran’s central bank is currently precluded from using the international “Society for Worldwide Interbank Financial Telecommunications (SWIFT) system, a global provider of secure financial management services to over 11,500 banks and financial institutions in over 200 countries.”x The SWIFT system is overseen by the G-10 central banks and headquartered in Belgium. Silently watching and monitoring these transactions is the US government, who along the way, is either in charge or influential at each point.
This mechanism is only part of a larger invisible framework, also included are the consortium of national banks, insurance and settlement systems enabling the US to retain strategic monetary power and leverage to restrain Iran’s banking transactions and thereby its economic sustainability. The president of the United States can exempt any foreign bank or country from access to US systems by issuing an executive order. Secondarily, executive orders coupled with evidence provided by the Department of Treasury influences the international banking system and thereby SWIFT, to endorse similar sanctions. The president delegates the authority for these actions to the Secretary of the Treasury, who tasks the office of foreign assets control (OFAC), part of the treasury’s office of terrorism and financial intelligence, for enforcement. Starting with President Carter’s administration, six other US administrations have issued executive orders imposing sanctions on Iran including: Presidents Reagan, Clinton, Bush, Obama, and Trump.
US Sanctions OFAC – Iran Shadow Banking
As previously discussed, the Secretary of the Treasury delegates sanction enforcement to the Office of Foreign Assets Control.xi They are charged with the administration and enforcement of “economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.”xii The number of sanctions placed on Iran by OFAC are substantial and listed by category on their sanctions search site.xiii In total, there are well over a 1,000 economic sanctions that have been placed on Iran, with significant focus aimed at Iran’s shadow fleet of oil tankers, businesses, and facilitators (people). Recent sanctions are designed to focus specifically on Iran’s network of shadow banks in efforts to track and disrupt the flow of illicit funding to Iran’s nuclear and terrorism proxy organizations. Operation Economic Fury,xiv announced on April 28, 2026, in accordance with Executive Order (EO) 13902, the operation is charged with “overseeing Iran’s shadow banking architecture, facilitating the movement of the equivalent of tens of billions of dollars tied to sanctions evasion and Iran’s sponsorship of terrorism.” xv In efforts to negate the international financial framework and banking system and its consortium of controls, a rouge set of private Iranian companies simply known as “rahbars,” have established thousands of overseas shell companies to transfer money on behalf of the regime.
These companies are aligned with Iranian banks in efforts to negate the established international financial framework and transfer billions of dollars of revenue gained from Iran’s sale of oil to its customers throughout the Middle East and China. The US government has outed the Rahbar network to the international finance and banking community purposefully; as a way for OFAC to place all on notice, the actions and penalties US Department of Treasury will impose on those who are aiding or abetting these shadow networks. Furthermore, Secretary Bessent has gone on record stating: “Illicit funds funneled through this network support the regime’s ongoing terrorist operations, posing a direct threat to U.S. personnel, regional allies, and the global economy. Financial institutions are on notice: Any institution that facilitates or engages with these networks is at risk of severe consequences.”
Chinese Linkage and Interplay
The People’s Republic of China (PRC) is the largest consumer of Iranian oil, purchasing almost 90% of its energy needs from Iran; this provides billions of dollars to fund the Iranian regime’s government, military weapons, nuclear development program and funds its terrorist proxies such as Hezbollah in Palestine, Lebanon, and the Houthis in Yemen. The PRC also helps Iran to evade US sanctions, having set up its own shadow banking and financial transaction systems. These shadow companies pay for the transportation of oil, Iran’s shadow fleet, and its missile and drone programs. This relationship benefits the PRC and Iran on several levels; of primary importance to both regimes is undermining the US-led global financial framework. Secondarily, the PRC obtains discounted oil prices, while Iran uses the PRC’s networks to maintain access to hard currency. The PRC considers this a partnership; however, it remains an asymmetric relationship, as “Iran depends heavily on China for energy export revenue and diplomatic backing, while Beijing maintains a cautious approach to avoid jeopardizing relations with other Middle Eastern partners.”
For now, Iranian oil exports and the accompanying revenues from sales to China have been reduced or halted altogether. As the US Navy continues its blockade of the Strait of Hormuz by impeding entrance and exit to Iranian ports, and stopping oil exports, this has also stopped billions of dollars of hard currency from going to Iran, thereby collapsing revenue needed by the regime. Consequently, Iran will be forced to spend whatever cash it retains on its war efforts and survival and must do so without a steady stream of replacement income. When combined with current economic sanctions, this will further degrade economic activity in an already stressed system and devalue their currency even further, leading to hyperinflation.xix When combined, these actions will implode Iran’s economy. Under these conditions, the regime would be hard-pressed not to return to the negotiation table. Chart 2 below shows Iran’s oil exports to China vs. the Rest of the World; providing a visual example of Iran’s reliance on oil exports to the Chinese.
While not full-proof, US banking sanctions on Iran has forced the Iranian regime to trade in less preferred currencies such as China’s Yuan (CNY). With the advent of what is now termed the ‘Petroyuan,’ China is seeking to undermine the US dollar as the global currency of exchange. China has made significant efforts to ease Iran’s isolation and reduce the effectiveness of economic sanctions such as “facilitating its entrance into alternative multilateral institutions including the Shanghai Cooperation Organization (SCO) in 2023 and into the foreign economies of (Brazil, Russia, China, South Africa) BRICS, in 2024.”xxii Additional help in the way of offering low interest loans including infrastructure upgrades and repair works to both embolden and financially enable the regime to hold out for a longer period.
Membership in these organizations brings Iran into closer alignment with China and Russia and helps China’s goal of using them to promote illiberal norms, help mitigate the impact of sanctions tools, and coordinate on security issues.xxiii
Should China’s actions be successful, it will cement the anti-US regime’s place within the BRIC system and the “Axis of Autocracy”;xxiv in turn, this will undermine the US-led financial system and the dollar. Conversely, should the regime be forced to negotiate with the US administration due to its maritime blockade of goods and services, China’s strategic efforts within the global financial system would lose momentum.
Final Thoughts
Already brutalized by their own regime, the war has taken a terrible toll on everyday Iranians and their families. Human Rights Watch (HRW),xxv an international organization monitoring abuses in all corners of the world, reported mass killings of Iranian citizens by their own security forces totaling well over 3,000 across all provinces, with over 2,000 bodies counted in Tehran alone. In addition, the US–based Human Rights Activists News Agency (HRANA)xxvi reported that 1,407 people, including 214 children, have been killed in Iran since the war began. This past January 2026, in efforts to counter these actions and hold the regime accountable for its atrocities, OFAC implemented a subset of sanctions on Iranian regime officials for violent repression and corruption. Secretary of the Treasury Scott Bessent stating: “President Trump stands with the people of Iran and has ordered the Treasury to sanction members of the regime. Treasury will continue to target Iranian networks and corrupt elites that enrich themselves at the expense of the Iranian people.”
Furthermore, war reporting confirmed by the BBC on March 23, 2026,xxviii mapped significant damage to Iran’s nuclear facilities, military and government infrastructure, public buildings and its energy and civil infrastructure targeted by US and Israeli military strikes. At the time of this writing, BBC Persianxxix has confirmed visual evidence of 191 attacks across most Iranian provinces, including 81 strikes in Teran, with many more since then. US Central Command (USSCENTCOM), the combatant command responsible for military operations in the Middle East area of operations (AOR), reported that it had flown over 8,000 combat flights since the war began February 28, 2026. To date, according to the Department of War (DoW), 15 service members have been killed in action. With the Iranian people desperate and destitute, and their infrastructure bombed and crumbling, how long the Iranian regime continues to hold out remains unknown. However, their economic viability is akin to Ernest Hemingway’s famous comment on how bankruptcy occurs: “two ways, gradually, then suddenly.”
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